What is macroeconomic analysis?
Macroeconomic analysis concerns the process of using macroeconomic factors and principles in the analysis of the economy. Macroeconomic factors include factors such as unemployment, inflation, government policy, gross domestic product (GDP) and interest rates. These factors enable economists and financial analysts an informed assessment of the state of the nation's economy. This analysis allows economists to carry out accurate predictions or predicting the future of the economy in relation to past and contemporary statistics.
During the macroeconomic analysis process, economic trends are studied to see if there are signs of inflation. The non -modified inflation that has a spiral out of control is harmful to the economy of any country. Inflation can be divided into expected and unexpected inflation. During macroeconomic analysis, the economic trend will allow economists to predict whether there is a probability of inflation in Future. If this is the case, businesses and even governments can take proactive measures to alleviatethe effects of inflation. If inflation is not expected, such a protective measure will not be taken, which would remain vulnerable to the effects.
The process of macroeconomic analysis includes a study by government policies that affect the economy. When the government has too many enemy economic policies, it will discourage economic growth by scaring investors and making an economic climate hostile for local companies. Such enemy economic policies include excessive taxes and import duties. GDP is also relevant during macroeconomic analysis because it is also an indicator of the state of the economy.
When GDP is stable, it can be considered a positive factor if it is at the desired level. When GDP drops to a low level, this can be considered an indicator that there is insufficient demand for goods and services. On the other hand, too increased GDP is a bad sign, which means the market is overheating and mIt can collapse soon. If this is the case, the government may decide to intervene by manipulating the economy through mechanisms that include interest rates.
If the interest rate is high, it can discourage consumers from spending money and inserting them towards more saving. Such a strategy will also reduce high GDP, which was caused by excessive consumer expenditure. The opposite is the case where the interest rate is low. More consumers will be encouraged to borrow more from creditors to finance their purchases. This step will increase consumer expenditure again and push GDP up.